The Bears Are Coming(?) for AMD Stock
AMD (NASDAQ:AMD) has entered a Bearish phase recently with the stock now trading in a tight range between the 50 day moving average and the 100 day moving average. For those that may be unfamiliar with a moving average; this is an average commonly used to track the movement of share prices over a period of time, typical averages are the 50, 100 and 200 day averages which signal the movement of the price of a stock. AMD’s share price has languished following its recent highs after the launch of its latest Ryzen 3000 series processors this July with AMD now off 8.97% from its July high of $34.39 per share. (cue ‘Death of AMD chorus’)
Pressure for AMD
AMD is under pressure on multiple fronts recently with news of a problem with its Turbo Boost functionality as well as expected competition from Intel which is planning new processor releases and the expectations in the market of reduced prices. In addition to this the turnaround story of AMD is mostly played out as stated by James Brumley at InvestorPlace, “Now, more than three years in and the turnaround largely complete, the stock reflects its maximum plausible value. In other words, the turnaround is over.” Which means any future moves by AMD will be based on the accomplishments of the company and continued positive revenue and earnings growth.
Intel (NASDAQ:INTC) has capitalized on the stumble of its rival AMDs Turbo boost issue to regain ground that it has recently lost with a series of product teases and release announcements such as the new Intel Cascade Lake-X cpus, the new Core i9-9900KS expected in October, the reported expectations of Intel entering the GPU market with its Next-Generation Xe Graphics card and the promise of aggressive competition in all areas of the CPU market. Intel with the recent positive news is now trading well above the 50 day moving average with shares trading up about 15.46% above their recent 8/23/19 lows.
Going forward the things to look out for is AMDs correction of its boost clock problems (you can read more about our coverage here) and the soon to release Threadripper HEDT updates. Also on the horizon are the expected releases of AMD’s smaller Navi GPU’s set to replace the aging Polaris cards the 570/580. Both of these products will be a main determining factor for AMD in future quarters while Ryzen 3000 series processors continue to sell well with some specific and highly popular processors like the Ryzen 3700x in short supply. Hopefully AMD will be able to continue ramping up supply to meet current demand to increase its ASPs (Average selling price) across its product portfolio.
Based on AMD’s recent history and successful execution thanks in large part to CEO Lisa Su who joined the company as CEO in 2014 and has since lead an astounding turnaround for the company there is a good chance of a move up for the stock from here based on the above factors. However, any negative reception to the expected boost fixes expected to roll out soon could see the share price tumble towards its 200 moving average and expected resistance points of $27.40 per share. There are considerable risks with an investment in AMD though as the company is currently trading at a trailing PE Ratio of 166.1x which means that the price of a share as it relates to its actual past earnings puts it in a dangerous position in the event of an economic downturn. The forward PE multiple is a much more reasonable 28.51x which is based on the projected future earnings of the company.
Intel meanwhile is looking to once again regain market and mind share it has recently lost to AMD with new products and a wider release of its lamentably late 10nm process. Intel has a much more reasonable trailing PE ratio of 12.5x and a future PE of only 11.15 which just goes to show the continued dominance of Intel in the chip market and the huge gap AMD will need to traverse to grow as a competitor. It will be interesting to see if Intel can maintain the run up of its share price over the last week or if it will again tumble back to the 200 day moving average of $49.35.